How Do Hospitals Set Prices for COVID-19 Isolation Rooms?

COVID-19 has dramatically impacted the hospital industry. As hospitals adjust to new challenges, they must also face questions about new procedures and treatment requirements. Last week we took a close look at how hospitals are pricing COVID-19 lab tests. Now, let’s take a look at isolation rooms.

We sent out a survey to assess how hospitals were approaching this new pricing challenge. We received 40 responses.

Some of the questions focused on isolations rooms. These are not always broken out as a separate charge in the CDM. We asked our responders how many of them have an established isolation room charge. About 40% have a rate or plan to develop one. The remainder don’t and do not plan to add.

For those that already have a charge, or plan to add, a majority consider Room Capabilities (for example, a negative pressure environment) and different levels of clinical resource utilization (higher nursing ratios or protective supply usage, as example) as important when defining the charge.  

For those that have established a room rate, most consider it a separate room rate, not an add-on fee on top of the base room rate. Those that have established a rate, or plan to, about a third have for both special care (ICU) and routine (general med/surg bed).

For hospitals that currently have isolation room charges, or plan to add one, here is how they plan to proceed (it’s assumed that the 68% who did not respond represent the 60% not able to as they have no isolation room rate and/or do not plan to add one):

If you’d like more information about our survey, or to take a look at the result, let us know!

Hospitals Set Prices for COVID-19 Lab Tests

COVID-19 has dramatically impacted the hospital industry. As hospitals adjust to new challenges, they must also face questions about new procedures and treatment requirements. In our next two blog posts, we’ll take a close look at how hospitals are pricing COVID-19 lab tests and isolations rooms.

We sent out a survey to assess how hospitals were approaching this new pricing challenge and were pleased to receive 40 responses.  In the midst of this challenging time, we appreciate this sharing of information!

We’ll first look at how hospitals are pricing COVID-19 lab tests.  First, some context: On March 5 and February 13, CMS announced new HCPCS codes to test patients for SARS-CoV-2/2019-nCoV (COVID-19). Starting in April, laboratories using CDC tests are to use the U0001 code while non-CDC tests will use the U0002 code.  Medicare payment has been established at $36 for U0001 and $51 for U0002.  On April 15, reimbursement was increased to $100 for U0003 and U0004 for sites using high throughput technologies. 

Our survey focused on how hospitals are developing CDM and cash pay pricing for these tests.  Cash pay pricing is an important element as part of the stimulus package requires that providers post a cash pay price for these tests.  Three key points emerged from the survey:

1. CDM pricing:
   1. over 60% of respondents are using some markup over Medicare payment, cost, or non-Medicare reimbursement.  Meaning, the majority are pricing these tests in a way that is likely consistent with other items in the CDM. 
   1. 25% are essentially creating a CDM price that is virtually the same as the Medicare payment/cost/or non-reimbursement rate.
2. Cash pay pricing: Roughly half are posting a cash pay price that is virtually the same as the Medicare payment/cost/or non-reimbursement rate. 
3. The combination of both points above make it clear that no one is trying to make money on these tests – just providing the ability to cover costs.  Even those using a markup to create pricing appear to be setting rates such that when their payer discounts or self-pay policies are applied the end payment will be virtually the same as their cost. 

If you’d like more information about our survey, or to take a look at the result, let us know!

A Quick Guide to Comprehensive APCs

Comprehensive APCs, aka C-APCs, are much like DRGs but on the Outpatient side. Comprehensive APCs expand CMS’s intentions of the Outpatient Prospective Payment System (OPPS) being a partially packaged system.  

The official definition is:

“A classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service.”

C-APCs are identified by HCPCS with assigned status indicator = J1 or J2.  All covered services on the claim are packaged with the primary J1,J2service.  CY 2020 includes 2,977 HCPCS codes assigned J1 or J2 status and therefore, triggering a single claim payment.  All those HCPCS are placed into C-APCs based on clinical family.

This is the history of C-APCs. They began in 2015 with 25 C-APCs involved. Today, there are 67 C-APCs that are part of the OPPS.

History of C-APCs 

Services typically additional to the primary service and provided during the delivery of 

the comprehensive service (and NOT paid separately) include:

• Diagnostic procedures
• Laboratory tests
• Other diagnostic tests & treatments that assist in the delivery of the primary procedure
• Visits & evaluations performed in association with the procedure
• Un-coded services and supplies used during the service
• DME, prosthetic/orthotic items and supplies, when provided as part of the outpatient service
• Any other HCPCS code representing services given during the complete comprehensive service

Some services are excluded from the packaging into a single payment. The following are NOT included in the C-APC payment and ARE paid separately:

• Corneal Tissue (status indicator = F)
• Pass-Through Drugs and Biologicals (status indicator = G)
• Pass-Through Devices (status indicator = H)
• Influenza & Pneumococcal Pneumonia Vaccines (status indicator = L)
• Brachytherapy Sources (status indicator = U)
• Ambulance 
• Mammography (diagnostic & screening)
• Rehabilitation Therapy
• New Technology
• Self-administered drugs
• All Preventative services

Based on CMS All US volumes, the most reported top 5 C-APCs (out of 67) Nationally over recent years include (listed in order of most frequently reported):

REMEMBER: OPPS is not a simple fee schedule – something to really think about when using as a guide for pricing strategy!

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Sometimes ComprehensiveAPCs may get confused with CompositeAPCs.  Stay tuned for our post coming soon, “What are Composite APCs?”

Managed care contract terms

Laura Jacobson RHIA – Data Quality and Reimbursement Consultant

Laura is an expert on data quality and compliance issues, making sure our clients receive accurate and immediately useful results. She works with managed care contracts, modeling reimbursement terms for pricing and payment work. Her work allows our consultants to give accurate advice to help our clients be financially stable and successful.

Part of my job each day is to read through managed care contracts and decipher how the language applies to payment. I’ve noticed a few key areas that are often generically included or unclear, which can lead to a misunderstanding of how a payer reimburses their claims. Make sure these items are fleshed out in your payer contracts to ensure a complete understanding of how your claims are paid.

1. Lesser of language– A lesser of clause indicates a payer will pay the lesser of either the payment rate or the amount charged. Most contracts with this language will include a brief sentence stating that this applies, however most don’t specify how it is applied. For example, if the contract includes line-level payment such as a fee schedule, how is the payer evaluating these claims? Are they looking at the claim in aggregate and summing the payments and charges, or are they looking at each line separately? The resulting payment will differ depending on the approach used so, it is important to understand exactly how the payer is evaluating these claims.
2. Service Definitions– Every contract lists the service and the corresponding rate, but make sure your contracts also include how the service is identified. For example, does the payer define a cardiac catheterization by revenue code or HCPCS code? Do they require both in order to be paid? What codes does the payer use? And make sure the definitions are updated when code changes occur. If it is unclear what codes the payer requires for payment, there may be claims going out the door that are not receiving the correct payment or any payment at all. 
3. Stoploss Methodology– Your contract may include a stoploss clause, for example, a clause that changes the payment methodology when charges reach a threshold, but does it specify what items of the contract are included? The payer may be excluding services, such as implants and drugs or items paid a percent of charge, which will decrease the number of claims reaching this stoploss status. If you are modeling contracts to project future payments or trying to validate your claim payments, this can lead to inaccurate results.
4. Payment Hierarchy– Some contracts are great at specifying the hierarchy of payment, but many omit this entirely. For example, take a claim where the patient came through the ER and moved to observation. If your contract includes claim-level payment for both services, which one would apply? Does the claim receive an observation payment or an ER payment? Try to negotiate a section that clearly states the hierarchy of claim-level services. Again, not understanding this hierarchy can cause projections or validations that inaccurately represent your claims’ payment. 

Payers may not be omitting these things on purpose but leaving them out can lead to confusion and misunderstanding of how a claim should be paid. Review your contracts and if any of these areas are missing, try to negotiate them into your next renewal. Doing so can ensure both you and the payer are on the same page which leads to more accurate projections of claim payments and decreases the time spent reconciling payer reimbursement.